Scottish financial giant Alliance Trust said yesterday the UK was heading for a “mild” recession at the very least.
Outlining the impact of the Brexit vote on its own business looking after many billions of pounds of clients’ investments, Dundee-based Alliance said the economic outlook for the second half of 2016 was unclear after the UK’s decision to exit the European Union.
It added: “The UK economy appears set for at least a mild recession as investment and consumption freeze up in the midst of so much uncertainty.
“The question remains as to whether this will spill over into Europe and result in a slowdown across the global economy. The unprecedented nature of the current situation makes forecasting the impact particularly challenging.
“Political risks abound; from the US presidential election in November to other important elections and referendums in China, Germany, France and Italy over the next 18 months.
“With global economic growth already fragile, political uncertainty is sure to be a headwind for equity markets.
“In this uncertain environment we believe a defensive portfolio that is invested in companies that are growing through structural change – rather than those that are dependent on cyclical tailwinds – will be key to investment performance.”
Alliance underperformed throughout June, when its quoted equity holdings gave up gains seen over the first five months of the year amid “significant volatility” in markets, particularly around the time of the EU Referendum.
First half results showed a net asset value (NAV) total return of 6.6%, below the trust’s benchmark rate of 12%.
The company said the NAV was also impacted by other items, such as the value of debt and a pension scheme buy-in deal.
Net asset value per share – a key industry benchmark – stood at 591.4p at June 30, up from 561.1p at the end of last year.
Alliance, recently the subject of a withdrawn takeover approach from RIT Capital Partners, grew third party investment assets under management to £5.2billion during the first six months of this year, from £2.1billion at the end of 2015.
First half pre-tax profits came in at £212.9million, up from £36.6million a year ago, on revenue that was down by about 20% at £50.8million.
